Just before the start of the fifth day of testimony in the closely watched trade secrets trial between Waymo and Uber, the parties have reached an unexpected settlement of Alphabet Inc. subsidiary Waymo’s claims that Uber misappropriated proprietary information relating to self-driving car technology. The parties stipulated that pursuant to a settlement agreement, all claims in the lawsuit were dismissed with prejudice. Although the exact terms of the agreement were confidential, it was reported that Uber agreed to give Waymo an equity stake worth $245 million. Waymo had been seeking $1.9 billion in damages.

In February 2017, Waymo, LLC filed suit against Uber Technologies, Inc., Ottomotto LLC, and Otto Trucking LLC, asserting patent infringement, trade secret misappropriation under the Defend Trade Secrets Act and the California Uniform Trade Secrets Act, and unfair competition under California law. Waymo’s former engineer, Arthur Levandowski—who allegedly stole Waymo’s Light Detection and Ranging (LiDAR) technology and shared it with Uber when Uber acquired Levandowski’s self-driving truck company, Otto—was permitted to intervene in the case. In May 2017, the district court granted Waymo’s request for a preliminary injunction and ordered expedited discovery in the case. The court found that Waymo was likely to succeed on its trade secret misappropriation claims, based on evidence that Levandowski improperly downloaded over 14,000 files before leaving Waymo and that Waymo’s LiDAR laser system technology had been used in Uber’s development efforts. Uber had acquired Ottomotto and Otto Trucking for $680 million and hired Levandowski to lead its self-driving technology development. Waymo’s claims were later narrowed to the misappropriation of eight alleged trade secrets by Uber and Ottomotto. Trial began on February 5.

Testimony in the first four days of trial reportedly focused on Uber’s efforts to attract Levandowski in the months prior to Uber’s acquisition of Otto. In a statement released after the settlement was announced, Uber CEO Dara Khosrowshahi defended the decision to acquire Otto, but conceded that "the prospect that a couple of Waymo employees may have inappropriately solicited others to join Otto, and that they may have potentially left with Google files in their possession, in retrospect, raised some hard questions."

Khosrowshahi denied wrongdoing but pledged to take steps to make sure that Uber’s future research and development efforts do not step on Waymo’s rights. "To be clear, while we do not believe that any trade secrets made their way from Waymo to Uber, nor do we believe that Uber has used any of Waymo’s proprietary information in its self-driving technology, we are taking steps with Waymo to ensure our Lidar and software represents just our good work," Khosrowshahi said. "While I cannot erase the past, I can commit, on behalf of every Uber employee, that we will learn from it, and it will inform our actions going forward. I’ve told Alphabet that the incredible people at Uber ATG are focused on ensuring that our development represents the very best of Uber’s innovation and experience in self-driving technology."

In a January 30 ruling, the court had set limited parameters for allowing evidence or argument related to Uber’s litigation misconduct and spoliation of evidence in the trial. Regarding two particular instances of misconduct—Uber Technologies’ failure to timely disclose the destruction of five discs and repeated supplementation of its communications log and accounting after the ordered deadlines—the court ruled that it would instruct the jury that it could, but need not, draw any adverse inference from these facts.

On January 18, the court ruled that Waymo would be limited to recovery of damages based on Uber’s alleged use or disclosure of trade secrets. Although acquisition alone could support a trade secret misappropriation claim for damages, Waymo had failed to preserve a damages theory based only on acquisition, as opposed to use or disclosure after acquisition.

In November 2017, the court granted summary judgment to Waymo on Uber’s failure to mitigate damages and unclean hands defenses. Uber had asserted that Waymo created the false impression that its forensic investigation proved that Levandowski had stolen valuable trade secrets from Waymo by downloading 14,000 files. In that ruling, the court also rejected Uber’s assertion that one particular trade secret was generally known in the field, but agreed that another purported trade secret was not protectable.

In September 2017, the U.S. Court of Appeals for the Federal Circuit held that Waymo was not required to arbitrate its claims based on Waymo’s employment agreements with Levandowski. According to the Federal Circuit, Waymo’s claims did not rely on Levandowski’s employment agreements, and Waymo did not allege any collusion between Uber and Levandowski involving the agreements.